Kohlberg Kravis Roberts & Co and the Goldman Sachs Group, the two private equity companies that successfully bid $8 billion for the audio division of the Harman group in May this year has backed out of the deal.
Normally on such high profile take overs, the negotiations for sale tend to be the difficult part of the job and finalisation is a formality, but in this case, KKR and Goldman Sachs have told Harman that they are not bound to buy because of the ‘material adverse change’ that has occurred in the finance markets of late.
This has left Harman in a difficult situation. The first and obvious effect was its shares plummeting nearly one quarter to $85 (its 12 month high is $125.13) and its second step could be to appeal to legal recourse, although no such intention has been made as yet.
Harman's chaoirman, Sidney Harman. is reported as saying he is disappointed with the turn of events.
"We strongly disagree" with the decision by KKR and Goldman "and the judgment that went with it," Harman said. "The extraordinary attention required by senior management to process the KKR Goldman merger, including the diligence and the negotiations, consumed a significant portion of management's time. The confluence of these events in a six- to eight-month period generated what might be called the perfect storm."
Keeping his meterological theme, Harman concuded that ""Now the storm is over, we are again in full command of our circumstances and our extraordinary future."